Analys från DailyFX
GBP/USD Technical Analysis: Is a New Trend Setting In?
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Talking Points:
- GBP/USD Technical Strategy: Intermediate-term showing up-trend potential.
- The British Pound has been strongly-bid ever since last week’s Super Thursday announcement at the Bank of England. And even with a stronger U.S. Dollar, GBP/USD continues to set new short-term highs.
- If you’re looking for trading ideas, check out our Trading Guides.
In our last article, we looked at the shifting paradigms in GBP/USD after last week’s Super Thursday batch of announcements saw the Bank of England remove the dovishness that was continuing to drive the Sterling lower. By acknowledging that higher inflation is being expected in the U.K., the bank effectively warned markets that additional rate cuts may not be in the cards, and ever since, Sterling has traded with a rather aggressive bid.
Of particular interest is the fact that this week’s price action has seen strength in the U.S. Dollar, yet GBP/USD has still run to higher-highs; indicating that even though the Greenback has been getting accumulated, the rate of buying in GBP has been even stronger and more brisk. This could setup a fairly attractive scenario should USD find an element of weakness so that stronger bid in the British Pound could drive prices on the pair higher.
Now that we have the possibility of up-trend continuation, traders would likely want to look for support to develop before triggering long, and there are a series of levels to watch for in the early portion of next week for that support to begin to form. At 1.2087, we have the ‘post-Flash Crash swing-low,’ and if prices fall below this level, that would invalidate the bullish bias as lower-lows would be printing. A bit higher at 1.2328 we have the swing-high from mid-October/early November, and this had given the most recent swing low along with support during the reversal around U.S. Presidential elections. But the more attractive area for that higher-low to develop would likely be the zone around 1.2500 in the pair, as this is a confluent level that had provided multiple points of resistance before the trend burst-higher; and as of yet this level has not been tested for support after the breakout.
Given recent strength in the Greenback, that support could come into play fairly quickly; and stops on potential long positions can be cast to the deeper swing low in the effort of catching the next swing-higher.
Chart prepared by James Stanley
— Written by James Stanley, Analyst for DailyFX.com
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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